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Despite the still fragile housing market, Fannie Mae expects housing starts to triple by 2013.
According to the agency's economic outlook, housing starts are predicted to increase 17.3% and hit 710,000 this year, with another 47% increase to 1.1 million in 2012 and another gain of 42% in 2013 to nearly 1.5 million.
In 2010, there were about 510,000 housing starts.
"We expect a small rise in home sales this year, but significant amounts of supply and shadow inventory of expected foreclosures will continue to hamper a robust housing picture for some time," said Doug Duncan, Fannie Mae's chief economist.
The government-sponsored enterprise projects total sales of new and existing homes to climb 4.5% in 2011 to 5.43 million, following an estimated decline of 6% for 2010 to about 5.2 million from 5.53 million for 2009.
Mortgage originations will drop to $1.04 trillion this year from $1.53 trillion last year. Fannie Mae also expects mortgage rates will increase in 2011, but not substantially.
"Fixed mortgage rates are projected to rise throughout the year, but to remain below 5.5%," the report said. "Larger increases in mortgage rates without corresponding acceleration in job gains would pose a risk to the housing recovery."
The median new home price in 2011 is expected to drop, as is the median existing home sale price, down 2.1% to $214,500 and 2.1% to $167,900, respectively.
Fannie Mae expects the U.S. economy to "accelerate and sustain" above-par and less volatile growth in 2011 based on increased consumer spending and growing clarity concerning fiscal policy.
According to the agency's economic outlook, Fannie Mae anticipates the economy to grow by 3.6% this year with consumer and business spending leading the way. This prediction was revised upward from 2.8% in December.
"The economy has regained momentum entering 2011 and we see significant improvement in the economy's ability to grow compared to 2010," said Duncan.
Write toChristine Ricciardi.
Follow her on Twitter @HWnewbieCR.

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